FUNDING AND FINANCING OF SUSTAINABLE URBAN MOBILITY MEASURES - TOPIC GUIDE
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TOPIC GUIDE FUNDING AND FINANCING OF SUSTAINABLE URBAN MOBILITY MEASURES
Imprint About: This Topic Guide has been developed within the framework of the SUITS and SUMPs-Up projects, funded under the European Union’s Horizon 2020 Research and Innovation programme under Grant Agreements no. 690650 and 690669. Title: Funding and financing of Sustainable Urban Mobility Measures Authors: Stefan Werland (Wuppertal Institute) Frederic Rudolph (Wuppertal Institute) Reviewers: Vincent Leiner (EC) Axel Volkery (EC) Ana Dragutescu (ICLEI) Acknowledgement: This publication is made possible thanks to the contributions made by organisations involved in the SUITS and SUMPs-Up projects, all of whom are credited for their respective contributions. Disclaimer: The views expressed in this publication are the sole responsibility of the authors named and do not necessarily reflect the views of the European Commission. Copyright: All images in this publication are the property of the organisations or individuals credited. Use of this document is governed by a Creative Commons License CC BY-NC-ND 4.0. Cover picture: © Frederic Rudolph (Manchester) Contacts: Stefan Werland, Wuppertal Institute, Neue Promenade 6, DE-10178 Berlin, Tel.: +49 30-2887458-28, E-Mail: stefan.werland@wupperinst.org Dr Frederic Rudolph, Wuppertal Institute, Döppersberg 19, DE-42103 Wuppertal, Tel.: +49-202-2492-230, E-Mail: frederic.rudolph@wupperinst.org, Twitter: @fre_rud September 2019
Contents
1 Executive summary ..................................................................................................................................................... 5
2 Introduction ................................................................................................................................................................. 6
3 The 8 SUMP principle in the context of funding and financing ................................................................................. 8
4 Sustainable urban mobility planning steps for SUMP funding and financing ...................................................... 10
5 Funding and Financing Options for Sustainable Urban Mobility ............................................................................ 12
5.1 Local revenue streams ......................................................................................................................................... 14
5.1.1 Project related income ............................................................................................................................... 14
5.1.2 Pricing measures for individual car use .................................................................................................... 14
5.2 Employers contributions ....................................................................................................................................... 18
5.3 Value capture instruments ................................................................................................................................... 19
5.4 Local Option Sales Taxes ...................................................................................................................................... 22
6 National level funding ............................................................................................................................................... 23
7 European Funding and Financing Sources............................................................................................................... 24
7.1 Support instruments for the application process ................................................................................................ 25
8 Debt mechanisms and external financing ............................................................................................................... 26
8.1 Loans ..................................................................................................................................................................... 26
8.2 City Bonds ............................................................................................................................................................. 27
8.3 Green City Bonds................................................................................................................................................... 28
9 Facilitating the Involvement of the Private Sector .................................................................................................. 29
9.1 Engaging private companies as service providers ................................................................................................ 30
9.2 Public private partnerships in infrastructure development ................................................................................ 31
10 Overview of funding and financing instruments...................................................................................................... 32
11 List of references ...................................................................................................................................................... 33
FUNDING AND FINANCING OPTIONS FOR SUSTAINABLE URBAN MOBILITY
Guide to the reader
This document provides guidance on a specific topic edition of the SUMP Guidelines. They elaborate difficult
related to Sustainable Urban Mobility Planning (SUMP). It planning aspects in more detail, provide guidance for
is based on the concept of SUMP, as outlined by the specific contexts, or focus on important policy fields. Two
European Commission’s Urban Mobility Package1 and types of documents exist: While ‘Topic Guides’ provide
described in detail in the European SUMP Guidelines comprehensive planning recommendations on
(second edition)2. established topics, ‘Practitioner Briefings’ are less
elaborate documents addressing emerging topics with a
Sustainable Urban Mobility Planning is a strategic and higher level of uncertainty.
integrated approach for dealing with the complexity of
urban transport. Its core goal is to improve accessibility Guides and briefings on how to address the following
and quality of life by achieving a shift towards sustainable topics in a SUMP process are published together with the
mobility. SUMP advocates for fact-based decision making second edition of the SUMP Guidelines in 2019:
guided by a long-term vision for sustainable mobility. As
key components, this requires a thorough assessment of • Planning process: Participation; Monitoring and
the current situation and future trends, a widely evaluation; Institutional cooperation; Measure
supported common vision with strategic objectives, and selection; Action planning; Funding and financing;
an integrated set of regulatory, promotional, financial, Procurement.
technical and infrastructure measures to deliver the
objectives – whose implementation should be • Contexts: Metropolitan regions; Polycentric regions;
accompanied by reliable monitoring and evaluation. Smaller cities; National support.
In contrast to traditional planning approaches, SUMP • Policy fields: Safety; Health; Energy (SECAPs);
places particular emphasis on the involvement of citizens Logistics; Walking; Cycling; Parking; Shared mobility;
and stakeholders, the coordination of policies between Mobility as a Service; Intelligent Transport Systems;
sectors (transport, land use, environment, economic Electrification; Access regulation; Automation.
development, social policy, health, safety, energy, etc.),
and a broad cooperation across different layers of They are part of a growing knowledge base that will be
government and with private actors. regularly updated with new guidance. All the latest
documents can always be found in the ‘Mobility Plans’
This document is part of a compendium of guides and section of the European Commission’s urban mobility
briefings that complement the newly updated second portal Eltis (www.eltis.org).
1
Annex 1 of COM(2013) 91
2
Rupprecht Consult - Forschung & Beratung GmbH (editor), 2019
Guidelines for Developing and Implementing a Sustainable Urban Mobility
Plan, Second Edition.
4 TOPIC GUIDE: FUNDING AND FINANCING OPTIONS FOR SUSTAINABLE URBAN MOBILITY
FUNDING AND FINANCING OPTIONS FOR SUSTAINABLE URBAN MOBILITY
photo © Frederic Rudolph (Manchester)
1. Executive summary
This Topic Guide relates to Activity 8.2: Estimate costs • project related revenue sources such as public
and identify funding sources and Activity 9.2: Develop transport fares and the lease of advertising
financial plans and agree cost sharing of the 3rd phase space in buses;
of the SUMP cycle. It supports urban transport • the extension of the local tax base, for example
practitioners and other stakeholders identifying funding through the introduction of road user charges
and financing options for the development of SUMPs, the and parking fees or the use of value capture
implementation of measures, and the operation of mechanisms;
transport services. • National, bilateral, and European grants;
• Debt financing through loans and other
The transformation of urban mobility systems causes instruments such as issuing green bonds.
financial costs for the procurement and operation of Finally, a prudential engagement of the private sector in
innovative products and services and for the adaptation infrastructure development and service provision can
of existing infrastructure. While public budgets are reduce the direct burden on public budgets while
limited, investments in infrastructure and transport enhancing service quality (cf. Figure 1: Overview of
services compete against other spending priorities, and funding and financing instruments).
private investors often are reluctant to invest into The applicability of specific financing options critically
sustainable transport projects. Thus, cities need to seek depends on the national legislative environment. Many
additional funding and financing options and to develop of the instruments and case examples presented here
business models to attract private sector investments in may not be transferred to other Member States due to
the development of the urban transport system. the different distribution of responsibilities and powers
Moreover, financing schemes should cover the entire between the political levels in the Member States. This
SUMP cycle, starting from planning, to project report, however, can inspire the search for potential
implementation and procurement up to the operation funding and financing sources and is therefore aimed not
and maintenance of services and infrastructures. only at local and regional authorities but also at decision-
makers at the national level. Still, whether a specific
This requires the blending of different revenue sources, instrument can be used in a Member State needs to be
including: assessed on a case-by-case base.
TOPIC GUIDE: FUNDING AND FINANCING OPTIONS FOR SUSTAINABLE URBAN MOBILITY 5
FUNDING AND FINANCING OPTIONS FOR SUSTAINABLE URBAN MOBILITY
© Stefan Werland, Berlin
2. Introduction
Although many sustainability solutions have positive burden on other departments’ budgets or other tiers of
effects on public budgets in the mid- to long-run, the government (e.g. the national level) profit.
transformation of mobility systems requires capital
investments that often exceed the direct costs of While the public sector often has a limited capacity of
conventional solutions. The transition towards financing, private investors often are reluctant to invest
sustainable urban mobility systems requires both upfront in sustainable transport and mobility projects, as they
financing and long-term funding for re-paying the initial consider the provision of urban mobility a public service
expenses. and thus do not expect high financial returns (European
Most added values that sustainable mobility options Commission, 2014; Shergold & Parkhurst, 2016).
provide – such as increased liveability of cities, positive An analysis carried out in the SUMPs Up project indicates
health impacts, increased accessibility – are not that financing sump development and measure
considered in cost-benefit estimates since they are implementation is a mayor barrier for the uptake of the
diffuse and often hard to monetise, they reduce the SUMP concept across the EU (Chinellato et al., 2017).
Table 1: Additional support needed from national government for SUMP development for countries with at least 15 participating cities
(multiple answers possible; results are not weighted by country population). Source: (Chinellato et al., 2017, p. 30)
6 TOPIC GUIDE: FUNDING AND FINANCING OPTIONS FOR SUSTAINABLE URBAN MOBILITY
FUNDING AND FINANCING OPTIONS FOR SUSTAINABLE URBAN MOBILITY
To overcome this financial gap, municipalities and tickets. The introduction of push & pull approaches, that
regions need to seek smart funding and financing options aim at pricing private car use while re-investing revenues
beyond the use of public budget and ‘classic’ debt into more sustainable alternatives is one puzzle piece of
financing. They need to develop financing models and to a more sustainable urban mobility system.
ensure reliable funding streams to attract private sector
investments. Covering the long-term funding needs of a
sustainable urban transport system comprises a well- This Topic Guide structures the different funding and
balanced combination of user charges, local taxes, finance options for sustainable urban mobility actions. It
transfer payments and subsidies. informs public authorities, urban mobility practitioners,
and policymakers about funding and financing options
Still, the transition towards a sustainable urban mobility that facilitate the transformation of urban mobility
system that is universally accessible and meets the basic systems towards sustainability. It aims at compiling
mobility needs of all users requires a readjustment of the publicly accessible – though dispursed – knowledge
financial environment: The greatest share of funding, better accessible, including cities’ experiences,
financing, and implicit subsidies still go into motorised outcomes of research projects and information provided
individual transport. One main reason for the slow uptake by key stakeholders such as the European Investment
of sustainable transport options is that the true costs of Bank. While this guidance cannot explore all options in
individual car trips are not reflected in prices and, on the detail, it may serve as a source of inspiration for
individual level, the use of a car is not related to out-of- sustainable financing actions and the identification of
pocket costs – unlike the purchase of public transport funding sources.
Parts of this Topic Guide are based on the CIVITAS SUITS project’s Guidelines to Innovative Financing, edited by Aleksei Lugovoi and
Alice Parker (Arcadis).
Moreover, the following persons provided valuable contributions:
- Agenzia Mobilità Ambiente e Territorio, Milano: Valentino Sevino
- Área Metropolitana do Porto: Carla Oliveira
- Birmingham City Council: Helen Jenkins
- City of Cluj Napoca: Ghiurco Razvan Ionut
- City of Donostia-San Sebastián: Iñaki Baro
- City of Edinburgh: Steven Murrell, George Lowder, Katherine Soane, Charles Graham, Gavin Graham, Mollie Kerr, Kyle
Drummond.
- City of Maia: Marta Susana Moreira
- Ile de France Mobilités: Laurence Debrincat
- Sofia Urban Mobility Centre: Desislava Hristova
- Torino Wireless: Chiara L. G. Ferroni
- Wuppertal Institute: Thorsten Koska, Kain Glensor
It also considers the outcomes of session C3 of the 2019 SUMP conference in Groningen and the contributions of:
- Vincent Leiner (DG Regio)
- Ivo Cré (Polis)
- Ozhan Yilmaz (EIB)
- Samuel Alexios Salem (Transport Authority of Thessaloniki)
TOPIC GUIDE: FUNDING AND FINANCING OPTIONS FOR SUSTAINABLE URBAN MOBILITY 7
FUNDING AND FINANCING OPTIONS FOR SUSTAINABLE URBAN MOBILITY
3. The 8 SUMP principles in the context of funding and
financing
1. Plan for sustainable mobility in the 2. Cooperate across institutional
‘functional city’ boundaries
Financing schemes for sustainable urban mobility
Planning for the functional area requires costs sharing solutions will blend different sources of investment
and compensation mechanisms between the individual capital, ranging from local level revenues to regional and
municipalities in the region. national programmes, bi-lateral initiatives, up to
European instruments.
Since local public transport services usually do not
operate cost-effectively and are financed through a While pricing measures generate income for public
combination of user fees, public subsidies, and other budgets and thus affect the financial administration,
sources, the provision of an integrated, coherent tariff available support programmes and instruments are
policy and seamless transport services requires cost- rooted in a broad range of policy areas – including
sharing and compensation agreements. Integration environmental, climate, economic, industry, research, or
might be facilitated through the existence or creation of regional development – and involve authorities from
a regional or metropolitan public transport authority. policy areas beyond transport.
Inner cities profit from investments into region-wide Integration of environmental policy, transport planning
public transport and bike corridors due to reduced and fiscal policy: concerns about GHG emissions and air
private car commuting, congestion and parking pressure. pollution, or adaptation to climate change can provide
Hence, central municipalities should financially legal justifications for pricing private car use. Beyond
contribute to the provision of bike infrastructure and park push and pull approaches that not only generate
and ride facilities at stations in the functional area. On environmental benefits but also provide financial
the other hand, municipalities in the hinterland benefit revenues for implementing sustainable mobility
from increasing land and property values when measures (see Chapter 5.1.2 on pricing measures),
connected to public transport infrastructures – actors such as environmental ministries or climate
specifically under transit oriented development schemes. funds can provide financial support for low carbon urban
A fair allocation of financial contributions among mobility measures.
municipalities to the mobility system is key for a
sustainable mobility in the functional area. Integration of spatial and transport planning: Public
investments in public transportation services and
Finally, demand management instruments are powerful infrastructure can increase adjacent land values, thus
measures that combine disincentives for the use of generating a profit for private landowners. The resultant
private cars and produce revenues that can be re- increases in land value (which otherwise benefit private
invested into high-quality mobility alternatives. However, landowners cost-free) may be ‘captured’ by converting
the introduction of parking management in one them into public revenue through various mechanisms.
municipality or district may increase parking pressure in Vice versa, new residential development could place
neighbouring areas; or inter-municipal competition to extra burdens on the existing infrastructure and
attract customers may lead to a ‘race to the bottom’ on resources in the local area, such as an increased volume
parking fees. To avoid problem shifting, pricing measures of traffic and congestion. Capturing added value from
need to be coordinated among the municipalities within public investments requires cooperation among mobility
the functional area. and land use planning as well as taxation authorities (see
Chapter 5.3 on value capture instruments).
8 TOPIC GUIDE: FUNDING AND FINANCING OPTIONS FOR SUSTAINABLE URBAN MOBILITY
FUNDING AND FINANCING OPTIONS FOR SUSTAINABLE URBAN MOBILITY
3. I n vo lve c i t i z e n s a n d re leva n t the replacement and maintenance of vehicles. Therefore,
implementation plans will have to rely on different
stakeholders
financial sources that cover both non-recurring upfront
costs and recurring cost.
A Sustainable Urban Mobility Plan focuses on meeting
the mobility needs of the people. Many pricing measures
such as the introduction of parking fees or road charging,
6. Develop all transport modes in an
however, commonly are perceived as another burden integrated manner
placed on commuters and urban dwellers. Thus, it is
important to increase acceptance of these measures, While a significant share of public spending currently
inter alia by lining out how these measures contribute to goes to individual private car use, sustainable urban
the provision of high-quality travel alternatives and to the mobility financing aims at making alternatives more
agreed vision on future urban mobility. viable and attractive. The urban mobility transition
requires a shift of focus from individual motorised
Public-Private Partnerships (PPPs) are forms of transport to public transport and active modes. The aim
cooperation between public authorities and businesses is to optimise the integration of mobility options rather
to deliver a public infrastructure project and service than favouring a specific solution.
under a long-term contract. PPP arrangements are
mechanisms for cost- and risk sharing among those 7. Arrange for monitoring and
partners. Properly prepared and managed PPP projects
can significantly reduce immediate costs for the public
evaluation
sector.
Ensuring that scarce public resources are invested is in
line with the municipalities or the region’s visions on
4. Assess current and future
sustainable mobility is one key precondition for the urban
performance mobility transition. Sound monitoring and evaluation
requires the provision of data from all stakeholders
Taxes, fees and charges should be arranged in a way they involved, including private sector partners. Adequate
steer demand for transport and mobility. Financial specifications need to be made in tendering documents.
mechanisms such as congestion charges, parking
policies and toll roads are financial instruments that aim
at discouraging private car use. If these mechanisms
8. Assure quality
successfully discourage the use of cars, city revenues
may decrease over time. At the same time, costs and High quality of services will attract commuters to public
proceeds for other modes such as collective transport transport and sharing systems. Continuous monitoring
and shared mobility may vary due to increasing demand. of service levels and the perceived quality of public
When applying demand management measures, cities transport services, in combination with contracts that
should anticipate these impacts, prepare for turnover comprise incentives for over-compliance and deductions
variation of involved institutions and apply institutional for underperformance can enhance quality of transport
governance. services.
5. Define a long-term vision and a clear
implementation plan
Financing relates to ensuring that the financial resources
or mechanisms are in place to cover the project costs as
they occur. Infrastructure may incur heavy upfront
investments, while the provision of services requires
long-term financing for personnel costs, energy use or
TOPIC GUIDE: FUNDING AND FINANCING OPTIONS FOR SUSTAINABLE URBAN MOBILITY 9
FUNDING AND FINANCING OPTIONS FOR SUSTAINABLE URBAN MOBILITY
4. Sustainable urban mobility planning steps for SUMP
funding and financing
This Topic Guide relates to the 3rd phase of the SUMP cycle (Activity 8.2: Estimate costs and identify funding sources
and Activity 9.2: Develop financial plans and agree cost sharing). The comparison of costs and benefits in step 7 of the
SUMP cycle has informed the selection of measures and measure packages, taking into account their likely overall
economic performance including wider social, health and environmental impacts (see box on project appraisal and cost-
benefit analysis below). Preparing the implementation of selected measures (step 10) requires assessing investment
needs and potential project revenues, identifying funding sources and financing options (Activity 8.2), and the formulation
of detailed financing plans (Activity 9.2).1
Project appraisal and Cost-Benefit Analysis (CBA)
Project appraisal is usually supported by decision support tools such as cost-benefit analysis (CBA) or multi-criteria analysis (MCA).
These can be used to assess (ex-ante and/or ex-post) the potential or observed value added of different policy options and to assist
decision-makers in selecting appropriate policies. CBA is a tool to improve project design, including options analysis, and in this
respect its use upstream during the project cycle is recommended.
Typically, CBAs only assess project related direct costs and revenues, but they can be expanded to also cover indirect costs and
benefits, given these can be expressed in monetary terms. CBAs are sometimes complemented with a multi-criteria analysis (MCA)
to allow appraisal of criteria that are not monetised.
While one of the main advantages of CBAs is transparency and the ease in communicating the results, care must be taken selecting
the assessment criteria and parameters. Since conducting a CBA can be a time-, resource- and data-intensive task, wider social,
environmental and economic impacts, along with less tangible effects such as comfort, quality of life or aesthetics, are frequently
excluded from the assessment – even though they might form central pillars of a SUMP. Moreover, the monetisation of non-monetary
effects is difficult and can be controversial.
The following steps need to be considered when carrying out a project appraisal:
• Identify the objectives of the project and the criteria against which it will be assessed. Clearly define the boundary of the
analysis, and its perspective (e.g. the functional area) and the period over which costs and benefits are analysed
• Identify alternatives and/or business as usual or do nothing/minimum scenarios.
• Identify and quantify the effect of each scenario/project on the criteria. Some impacts might have been identified that are
not quantifiable and/or difficult to measure. In a conventional CBA, these impacts are often excluded.
• Apply monetisation factors: The monetisation of non-monetary effects is difficult and current approaches – such as
monetisation of costs of fatal accidents – are controversial. As this is an elaborate process, often guideline values are used
(e.g. a standard value for the costs of one tonne of local particulate matter emitted).
• Apply local discounting rates. Future costs and benefits are discounted to their present value, allowing comparison of costs
or benefits that occur at different times.
• Calculate the various output values, such as Net Present Value (NPV), Benefit to Cost Ratio (BCR) and Internal Rate of
Return (IRR).
• Perform a sensitivity analysis on those variables deemed to be uncertain (e.g. discount rate, project lifetime, contentious
monetisation factors).
The CIVITAS Urban Mobility Tool Inventory provides tools that support project appraisal, including the conversion of relevant effects
into monetary units. For example, the uemi/solutions Impact assessment methodology for urban transport innovations is an easy to
apply tool for small scale measures, which includes CBA elements.
1
All tools can be accessed at the CIVITAS Urban Mobility Tool Inventory Website: https://civitas.eu/tool-inventory
10 TOPIC GUIDE: FUNDING AND FINANCING OPTIONS FOR SUSTAINABLE URBAN MOBILITYFUNDING AND FINANCING OPTIONS FOR SUSTAINABLE URBAN MOBILITY
The purpose of Activity 8.2 is to determine and to compare the performance of different measures and investment options
and to rule out those measures that are not financially viable. It will also assess project-related revenues and their
financial contribution to the transition of the urban mobility system. Activity 9.2 comprises a more detailed assessment
of investment needs, revenues, financing and funding sources for selected measures and measure packages.
Municipalities should determine investment and maintenance costs, potential changes in revenue streams, identify
financial contributors, and develop a funding and financing scheme for all measures/actions. Based on your organisation’s
conventions, a detailed financial scheme will be developed as part of the SUMP or within a separate process.
Milestone: Milestone:
Measure implementation Decision to prepare
evaluated a SUMP
12.1 Analyse successes and failures 1.1 Evaluate capacities and resources
12.2 Share results and lessons learned 1.2 Create inter-departmental core team
12.3 Consider new challenges and solutions 01 1.3 Ensure political and institutional ownership
12 1.4 Plan stakeholder and citizen involvement
02 Assess planning requirements and define
11.1 Monitor progress and adapt 2.1
Review Set up geographic scope (‘functional urban area’)
11.2
Inform and engage citizens and and learn working
stakeholders
2.2 Link with other planning processes
lessons structures Determine
11 Monitor,
planning 2.3 Agree timeline and work plan
adapt and
communicate framework
03 Consider getting external support
2.4
10.1 Coordinate implementation of actions
ion Prep Identify information sources and
10.2 Procure goods and services tat ng ar
at 3.1
e n to r i i cooperate with data owners
i
& m lem
Manage
on
Analyse mobility Analyse problems and
on
&
Imp
3.2
implementation situation opportunities (all modes)
ana
Milestone: 10 SUSTAINABLE
lysis
Sustainable Urban
Mobility Plan adopted URBAN MOBILITY
PLANNING 04 Milestone:
Mea
Prepare for adoption Analysis of problems and
nt
Build and jointly
me
and financing opportunities concluded
su
assess scenarios
op
re
Develop financial plans and agree la v
el
nn de
p
9.1
cost sharing ing gy
S t ra te 4.1
Develop scenarios of
Finalise and assure quality Develop potential futures
9.2
of ‘Sustainable Urban Mobility 09 vision and
Discuss scenarios with
Plan’ document Agree actions and strategy with 4.2
citizens and stakeholders
responsibilities stakeholders 05
Select Set targets
8.1 Describe all actions
measure and indicators
8.2
Identify funding sources and assess packages with 5.1
Co-create common vision with citizens
financial capacities
08 stakeholders and stakeholders
8.3 Agree priorities, responsibilities and timeline 06 5.2
Agree objectives addressing key problems
and all modes
Ensure wide political and public support
07
8.4
7.1
Create and assess long list of measures
with stakeholders 6.1 Identify indicators for all objectives
7.2 Define integrated measure packages Milestone: 6.2 Agree measurable targets
Vision, objectives and
7.3 Plan measure monitoring and evaluation targets agreed © Rupprecht Consult 2019
TOPIC GUIDE: FUNDING AND FINANCING OPTIONS FOR SUSTAINABLE URBAN MOBILITY 11FUNDING AND FINANCING OPTIONS FOR SUSTAINABLE URBAN MOBILITY
5. Funding and Financing Options for Sustainable Urban
Mobility
The development and implementation of innovative
projects and high quality services may entail extra Funding and financing
upfront costs, for example for the adaptation of
infrastructure assets or the procurement of new Financing means to mobilise financial resources to cover
upfront investments for the construction of infrastructure,
technologies that have not yet reached cost parity with
the procurement of vehicles and works, or the provision of
conventional solutions. Regarding tight public budgets, services. Sources of financing are public budgets or forms
cities may employ innovative funding and financing of debt financing from private banks, and investors,
options and seek private sector engagement to reduce including private equity firms and institutional investors
direct costs and risks. Identifying revenue sources, which such as pension funds or insurers. Debt financing is tied to
can be used to fund sustainable transport measures, repayment obligations.
Funding relates to sourcing financial resources to (re-)pay
forms an important component of a SUMP.
the upfront and on-going expenditures over the lifecycle. A
long-term funding model, i.e. a plan how to refinance initial
Common challenges related to financing expenses, often is a precondition for assessing private
sustainable mobility measures finance. Cash flows can be extracted directly from users of
a service or an infrastructure asset in forms of fees and
Sustainable funding and financing refers to mechanisms charges, or from groups that otherwise profit from public
to mobilise, govern or distribute financial resources for investments, for example property owners in the vicinity of
public transport and non-motorised modes and to steer public transport stations (local taxes). Other sources of
demand for transport (also known as mobility funding are financial transfers from the general budget or
management). They build on the principles of other tiers of government (e.g. the regional, national, or the
environmental and financial sustainability, that means they European level).
should also provide value for taxpayers’ money and have
the ability to bridge funding shortfalls and/or to create new
funding streams.
That said, local authorities may face a number of
challenges when considering the implementation of
sustainable urban transport and mobility projects (JRC
2018):
(1) Lack of capacities Funding sources for urban mobility comprise project-
- Lack of awareness of alternative finance options: Local
generated revenues, local taxation and transfer
authorities usually rely on public funds and are unaware of
financing tools such as municipal and green bonds (see payments from other tiers of government or the EU. The
Chapter 8) combination funding and financing sources will vary
- Multitude of public funds from different European widely from city to city and from project to project. While
sources: There is a range of public funding mechanisms on financial allocations from the municipal budget are the
the EU level, as outlined in chapter 7. Lack of legal and
most important source of income, many cities introduced
technical expertise and capacities for the preparation of
applications and securing financing can be challenging.
transport-related fees and charges to increase their tax
(2) Political and institutional barriers base (see Chapter 5). Most cities receive transfer
- Political resistance against local revenue sources such payments for the provision of public transport services
as parking management or road fees, which make use of from the national or regional level. National and EU level
private cars less attractive (see Chapter 5.1.2). funding (see Chapter 7) and lending instruments (see
- Lack of legal entitlement to raise mobility related charges
Chapter 8) are common for the realisation of larger scale
and taxes.
(3) Lack of financial resources and bankable projects projects, along with Public-Private Partnerships (PPPs,
- Own contributions: Most public funding schemes see Chapter 9).
prescribe that recipients contribute a share of the budget
on their own. Tight municipal budgets often limit cites’ Which funding options can be used critically depends on
ability to apply for funding. Thus, setting up a project might
the national legislative environment and the legal power
require a mix of funding and financing mechanisms
(Chapter 7 and 8).
of municipalities to raise charges and taxes. This report
- Ensuring the bankability of projects to ensure the can inspire the search for potential funding and financing
willingness of private investors to finance a project. sources. Still, whether a specific instrument can be used
other tiers of government (e.g. the regional, national, or the in a Member State needs to be assessed on a case-by-
European level). case base.
12 TOPIC GUIDE: FUNDING AND FINANCING OPTIONS FOR SUSTAINABLE URBAN MOBILITYFUNDING AND FINANCING OPTIONS FOR SUSTAINABLE URBAN MOBILITY
The following sections provide an overview of funding and financing options for sustainable urban transport measures.
Figure 1: Overview of funding and financing instruments
© Stefan Werland, Berlin
TOPIC GUIDE: FUNDING AND FINANCING OPTIONS FOR SUSTAINABLE URBAN MOBILITY 13FUNDING AND FINANCING OPTIONS FOR SUSTAINABLE URBAN MOBILITY
5.1. Local revenue streams
General city budgets and transfer payments from the national level usually are the main financing sources for urban
mobility systems. Still, depending on the respective Member State’s legal system and the constitutional competencies
of local administrations, municipalities may exploit additional sources for financing the urban mobility system. This
section outlines local revenue streams that are (or: can be) linked to sustainable urban mobility.
5.1.1. P ro j e c t re l a te d 5.1.2. Pricing measures
income for individual car use
Project generated income are public transport user fares Pricing measures are mechanisms that directly charge
or other revenue sources such as the lease of advertising motorists for the use of an infrastructure asset such as
space in vehicles or at bus stops. They cover a share of a parking space or a road. Existing taxes and fees levied
the operating costs of a transport solution, for example on private car use – such as fuel taxes, vehicle taxes or
a tramway or a BRT route. Project generated income will registration fees – neither reflect the social and
only be available after the start of the service, during the environmental costs nor do the achieve a shift towards
operation stage. Hence, using expected future revenues more sustainable mobility options. Moreover, these
for upfront construction costs requires additional financial streams normally go into the national general
financing arrangements or private sector invovlements budget and cities do not profit directly.
(see Chapter 9) for leveraging investments. Anticipated Adopting the user-pays or polluter-pays principle is a key
incomes from the operation can be used for capital component of a sustainable urban mobility system. The
borrowing or as means to attract external investors via rationale behind pricing measures is to charge private
the emission of bonds (see Chapter 5.4) or serve as basis car users for at least a substantial share of the external
for value capture mechanisms (see Chapter 5.1.3) costs they generate. Local level pricing measures aim at
There is a trade-off between cost coverage on the one changing travel habits, at managing transport demand.
hand and social concerns and attractiveness on the other Price signals link car use to directly discernible out-of-
hand: Since the provision of public transport is pocket costs and thus may encourage the use of more
considered a general interest, fares will normally not sustainable transport options. They also generate
cover all operation costs. Ticket prices need to respond revenues that might be ring-fenced for enhancing public
to social concerns by keeping the general fare level low transport and active modes in so-called push & pull
and by allowing reduced fares for low-income populations approaches
or pupils. To be effective, ticket prices should be lower
than variable costs of private car use (besides fuel costs,
The EU’s position on external costs of road use
these can be parking fees or road charges, see Chapter
5.1.2) to make public transport the more attractive The EU encourages Member States “to use taxation and
alternative. infrastructure charging in the most effective and fair
Public and private transport operators as service manner in order to promote the ‘user pays’ and ‘polluter
providers (see Chapter 9.1) will have to be compensated pays’ principles, as enshrined in the treaties.
This framework contributes to the internalisation of
from the general public budget or from ring-fenced
external costs related to road transport, such as those
incomes from other sources such as parking generated by the use of infrastructure or its environmental
management, road charges, and value-capture and social impacts. With the internalisation of costs, the
mechanisms as exemplified in the following. EU also wants to encourage a more efficient use of
transport infrastructures currently affected by congestion,
thus reducing time wasted due to bottlenecks.
Road charging can also be a useful instrument to generate
new sources of revenue to help develop Europe’s vital
infrastructure, as well as cleaner, more energy-efficient
modes of transport.”
https://ec.europa.eu/transport/modes/road/
road_charging_en
14 TOPIC GUIDE: FUNDING AND FINANCING OPTIONS FOR SUSTAINABLE URBAN MOBILITYFUNDING AND FINANCING OPTIONS FOR SUSTAINABLE URBAN MOBILITY
Transport demand managing measures that aim at Stockholm was supported by the majority of voters in a
discouraging private car usage through pricing referendum, following a seven-month full-scale trial
mechanisms usually meet political resistance. Public period. In Milano, the extension of the existing charging
acceptance of pricing measures tends to be low, as they scheme was supported by 79% of the voters in 2012.
are often perceived to be socially unacceptable, to deter Also, studies showed the importance of clearly stating
customers, and to add another burden on motorists who that revenues will be re-invested into the mobility
already pay a lot of taxes. system, including high-quality public transport but also
This implies that push measures should be presented in the maintenance of roads. The provision of viable public
a way to minimise public opposition as to ‘make the transport alternatives before the introduction of charging
unpopular popular’ (de Groot & Schuitema, 2012). It is schemes, also during off-peak hours, is also commonly
important to allow sufficient time for users to adapt their considered a success factor.
behaviour, for example through trial periods with free
public transport. Setting up a trial period may be a When estimating future revenues it is important to keep
means to gain approval from the population (Gu et al. in mind that the primary objective of pricing measures is
2018). In many cases, acceptance tends to rise during the to reduce private car use. That means that, if successful,
operation of a pricing scheme. For instance, despite an the measure will undermine its income-generating base
initial strong disapproval, the congestion charge in in the mid-term.
Road pricing and congestion charges require the use of car positioning systems and
Road pricing was introduced as a charge on the use of a thus are technically demanding and may
specific infrastructure asset such as a motorway, a interfere with personal data protection (Gu et al.
bridge or a tunnel, often in the framework of a concession 2018).
agreement with a private operator (see the section on Dynamic road charges that are higher in during peak
public private partnerships, Ch.9). More recently, road hours, or a linked to emission standards (or potentially
pricing was extended to city areas and road networks, to vehicle weight or size) may also affect mobility
and new schemes were introduced, including cordon and behaviour and the composition of the car fleet. The City
zone pricing, or distance and time based charging of Milano, for example, exempts electric vehicles,
systems. Road pricing aims at reducing traffic loads and hybrids, motorcycles and vehicles emitting less than
congestion and at making cities more liveable. Road 100g CO2/km from fees to enter its Urban Road Toll and
pricing schemes can have a strong influence on reducing Low Emission Zone Area C.
the volume of traffic and on encouraging people to switch Costs of implementing and operating a charging system
to other modes of transport (e.g. Rye 2016; Sammer vary according to technologies employed: fully automated
2016). There are different ways to implement such systems with number plate recognition or GPS
systems: monitoring demand higher upfront investments than the
regulation via the sale of licence stickers, while the latter
• as toll roads, where a fee is paid for the right to require higher staff costs for sale, control and
use a specific asset such as a highway or a enforcement.
bridge; Still, due to the often lacking legal power of municipalities
• as zonal schemes where vehicles travelling to introduce such charges, to political resistance, to high
inside a specific bounded area are charged; as upfront investments and concerns about privacy (linked
cordon schemes, where vehicles must pay for to automatic number plate recognition), only few cities in
entering the city centre; or the EU have implemented road charging systems,
• as distance-based schemes, where car drivers including London, Durham, Stockholm, Gothenburg,
pay per km travelled. Distance-based schemes Milano, or Valletta.
TOPIC GUIDE: FUNDING AND FINANCING OPTIONS FOR SUSTAINABLE URBAN MOBILITY 15FUNDING AND FINANCING OPTIONS FOR SUSTAINABLE URBAN MOBILITY
Increasing acceptance of pricing measures
• Inform the public well in advance about the objective of the charging system, its intended impacts, and how revenues will
be used.
• Communicate the measure in a positive way: as a way to ease pressure on the city’s mobility system and to make other
mobility options more attractive.
• Stress the role of the charging system as component of an encompassing mobility strategy.
• Provide adequate mobility alternatives use before introducing charging schemes
• Conduct a trial period to allow road users to accustom to the new system, to test alternative travel options, and to experience
potential benefits of the scheme.
• Consider concerns about equity and fairness, e.g. exemptions for vehicles used by people with reduced mobility
City Example: Milan’s Area C
The City of Milan introduced a congestion charge system “Area C”
on January 16, 2012. The area subject to the congestion charge is
called Cerchia dei Bastioni, a Limited Traffic Zone of 8.2 km2,
equivalent to 4.5% of the whole territory of the Municipality of Milan.
The access is limited from Monday to Friday from 7.30 am to 7:30
pm. Cars entering Area C are detected by a system of 43 electronic
gates (of which 7 are reserved for public transport vehicles),
equipped with automatic number plate recognition technology.
The entrance ticket costs €5. Residents have 40 accesses per year
free and pay €2 from 41st access onward. Electric vehicles, scooters
and motorcycles, public transport vehicles, taxis, emergency
vehicles, police, fire brigades, vehicles with disabled people on board
are exempted from the fee. Vehicles with Euro 0 (petrol), Euro 1, 2,
3, 4 (diesel) and vehicles longer than 7 meters are not allowed to
enter Area C. The entry of non-electric freight vehicles is not
permitted from 8am to 10pm.
Area C was introduced following a public referendum in which a 79%
of voters demanded an upgrade of the existing ‘Ecopass’ scheme,
which was introduced in 2008 as an attempt to reduce exceeding PM10 levels. In March 2013, the Municipal Board has confirmed
AREA C as a permanent and strategic measure.
The installation of Area C led to a reduction daily vehicles entrance from 132,000 entrances in 2012 to 82,000 in 2018 and traffic
congestion was reduced by 37,7%. The speed of public transport was increased and the number of public transport users went up
by 12% on surface and by 17% for underground public transport. Road accidents went down by 26% and air quality increased (total
PM10 -18%; Exhaust PM10 -10%; Ammonia -42%; Nitrogen Oxides -18%; Carbon Dioxide -35%).
During the year 2018, Area C generated revenues of approx. €33 million, 65% of which have been reinves ted for the strengthening
of public transport, 22% for development of sustainable mobility projects and infrastructures, and 16% of the incomes have been
used for the operating costs of the system.
16 TOPIC GUIDE: FUNDING AND FINANCING OPTIONS FOR SUSTAINABLE URBAN MOBILITYFUNDING AND FINANCING OPTIONS FOR SUSTAINABLE URBAN MOBILITY
Heavy goods vehicles charging schemes
City example: Brussels HGV charging scheme
Most European countries have implemented some form
of nationwide truck charging scheme, where all hauliers In 2016, the Belgian regions Brussels, Wallonia, and
Flanders introduced a distance-base road charging system
pay for using public roads, either by time or distance.
for heavy goods vehicles (HGV) on motorways and some
Whilst most heavy goods vehicles charging systems are major secondary roads. Brussels has tightened the
distance-based and managed at the national level, roads nationwide system by applying the tolls to all roads within
within individual cities could also be included into the the city zone and by demanding higher charges compared
system. Participating cities would then receive their fair to roads outside of the capital. The amount of the toll also
share of the proceeds, which they could spend on depends on the emission standard: Trucks with a Euro 5
engine must pay a higher fee than those with a Euro 6
maintaining their local road network and on investing
engine.
into more sustainable transportation and mobility In addition to the revenue, the system enables Brussels
schemes. and the two other regions to obtain more specific data on
HGV traffic on their road network. These data will be used
to inform mobility policy and adjust the toll system to better
suit regional and local transportation objectives. The
regions have the right to adapt the toll road network and
the rates twice a year.
Parking management
Parking management is another powerful lever to Parking measures often focus on regulating visitor
influence car travel and the modal split of commuters parking. Adequate provisions for residents such as
and visitors. Since the 1990s parking policies have reasonably priced annual permits in combination with a
increasingly been used as a tool to manage car traffic in reduced parking pressure may increase to the
and around urban areas in Europe (e.g. Shoup 2005; acceptability of parking management schemes.
Website push&pull).
Parking management normally is a task at the city level, The availability of cheap or unmanaged parking space
giving local authorities a high degree of autonomy. can make investments in high quality public transport
Usually a municipal parking policy has four main aims ineffective, most of all when car parking in the city centre
(Mingardo et al. 2015): is cheaper than travelling by bus or tramway. Parking
charges should therefore at least outweigh the cost of
• to contribute to a better accessibility and mobility using public transport for two people return tickets.
of the urban area;
• to contribute to a better quality of life in the city More information on parking management:
(mainly a better air quality and quality of the Two research projects provide more evidence and
living environment); practical examples on parking management:
• to support the local economy; • CIVITAS Park4SUMP: https://park4sump.eu/
• to raise municipal revenue. • Push&Pull: http://push-pull-parking.eu/
TOPIC GUIDE: FUNDING AND FINANCING OPTIONS FOR SUSTAINABLE URBAN MOBILITY 17FUNDING AND FINANCING OPTIONS FOR SUSTAINABLE URBAN MOBILITY
5.2. Employers contributions
Some authorities introduced dedicated taxes on public and private employers, which are used for expanding, maintaining,
and/or operating the public transport systems.
Examples are Vienna’s Dienstgeberabgabe, Nottingham’s Workplace Parking Levy, or the Versement Trasport in Île-de-
France. While revenues are reinvested into public transport in all cases, the specific tax base differs:
• a percentage of the wages paid in Île-de-France,
• the number of workplace parking spaces in Nottingham, or
• a fixed amount per employee in Vienna, where employers pay 2€ per employee per week, with exemptions for
elderly employees, for employees with mental and physical handicaps, part-time employees, public authorities,
etc.
City example: Workplace parking levy scheme in Nottingham (UK)
City example: Workplace parking levy scheme in Nottingham (UK)
A Workplace Parking Levy (WPL) is a specific parking management approach. It is a charge on employers based on the number of
parking spaces they provide for their employees. The introduction of a WPL usually
aims at raising funds for transport and mobility improvements and at discouraging
communing by car.
Introducing WPLs may require adapting parking ordinances that define minimum
off-street parking requirements for buildings. Controlled parking management
photo © Stefan Werland
measures in the local area may be required to avoid displacement of off-street to
on-street parking.
In Nottingham, a levy on large employer’s parking at workplaces was introduced
in 2012. Employers that provide 11 or more workplace parking bays are liable to
pay a charge for each of those places. Importantly, employers, rather than
employees, are responsible for paying any WPL charge, although employers can
choose to pass the cost of the WPL to their employees. A salary sacrifice agreement allows an employee to sacrifice part of their
salary in return for a tax-exempt benefit, in this case, workplace parking.
The WPL is an annual charge, set in line with inflation. A retail price index is used to calculate yearly increases in the levy, which
currently is £415 per year and parking place (2019).
In the first three years of operation, the workplace parking levy raised £25.3 million of revenue, all of which has funded improvements
in the city’s transport infrastructure, including the extension of the tram network and the procurement of electric buses.
City Example: Versement Transport in Île-de-France
Île-de-France Mobilités is the regional mobility authority in the Île-de-France region
which comprises the City of Paris and the seven other départments of the region.
It is tasked inter alia with organising the public transport network, determining
service quality, contracting PT operators, monitoring network investments,
developing urban mobility plans and ensuring the financial balance of the operational
expenditure.
Therefore, Île-de-France Mobilités benefits from a specific tax, the Versement
Transport. This tax is levied on the employers both private and public as soon as they
employ at least 11 employees. The tax is calculated as a percentage of the wages.
The maximal rates are fixed by a national law and île-de-France Mobilités decides
which rate to apply (as a matter of fact maximal rates are always applied).
The Versement Transport is collected by the organisation in charge of the collection
of social taxes on behalf of île-de-France Mobilités. Tax income is used to finance the operators (RATP, SNCF and private bus
companies) within the framework of operational contracts and. It also finances part of Île-de-France Mobilités investment costs, such
as rolling stock renewal. The tax contributed, in 2017, to 42 % of the financial resources that covers total operation costs and part of
Île-de-France Mobilités investment costs.
In the first three years of operation, the workplace parking levy raised £25.3 million of revenue, all of which has funded improvements
in the city’s transport infrastructure, including the extension of the tram network and the procurement of electric buses.
18 TOPIC GUIDE: FUNDING AND FINANCING OPTIONS FOR SUSTAINABLE URBAN MOBILITYFUNDING AND FINANCING OPTIONS FOR SUSTAINABLE URBAN MOBILITY
5.3. Value capture instruments
Public capital expenditures for infrastructure and for example a defined walking time (Transport for
transportation services are a precondition for urban London, 2017, p. 39).
development, and specifically for transit oriented
development (TOD) which aims at enhancing public Mobility Taxes
transport accessibility of new settlements. These The Metropolitan Area of Barcelona (AMB) raises a
investments contribute to increasing values of land and metropolitan tax which inter alia is used for enhancing
real estate in proximity to transport access points, and connectivity, mobility and functionality of the Metropolitan
thus generate additional benefits for private property Area. The tax is levied on the value of real estate and it is
owners. calculated based on its cadastral value. Revenues are
On the other hand, new residential developments invested into public transport system (increasing
produce more road traffic and greater demand for public territorial and time coverage and frequency, integrated
transport services. Local authorities are faced with a fares systems, subsidising ticket prices etc.). AMB
situation in which the development puts increased estimates revenue from the metropolitan tax of 123
pressure on the infrastructure they provide, while being million in 2019.1 Revenues are recurring and can be
unable to profit from the added value that they have invested both into the construction of infrastructure
created through granting planning permissions. assets and into operation and maintenance of the public
In recent years, cities introduced a variety of instruments transport system.
to capture at least a part of the additional value from key
beneficiaries of a project, including property owners and Voluntary capture
land developers. The rationale that those who benefit Increasing private property value could also be captured
from a development and/or the provision of infrastructure voluntarily, through direct contributions to the funding of
and public services should make some financial that investment. Voluntary capture is based on an
contribute is a broadly accepted and powerful narrative. agreement between developers or property owners and
Value capture mechanisms are a means of linking a local authority, where the developers or property
increasing land and property values with the delivery of owners offer a voluntary contribution towards the costs
public transport services. The approaches differ of a public infrastructure project. Voluntary contributions
according to the stage of the project cycle from which the tend to be offered when the developer or property owner
income is available and according to the parties that are calculates that the benefits they will receive from the
financially burdened. provision of public infrastructure outweigh the cost of
investing in it. Since voluntary capture normally is a one-
Stamp duty land tax off payment, revenues will be used for the construction
Stamp duty land tax (SDLT), as introduced in England and of infrastructure, not for covering the long-term
Northern Ireland in 2003, is one such method of operation of services.
capturing increases in land values. Owners of properties
above a certain value pay it when the property is
purchased. The tax can be applied in areas that
specifically benefit from public transport services. The
main argument for the tax is that the availability of high
quality transport services increases the value of land and
that these benefits for landowners are partly captured
through the SDLT (Sintropher, 2015).
While SDLT increases the municipality’s general budget,
its revenues can be used to re-finance the development
of public transport or other measures towards more
sustainable urban development (Transport for London,
2017, p. 39). Charging zones with differentiated tax rates
can be defined in terms of proximity to public transport
stations, either using a distance metric or an isochrones, 1
https://www.metropoliabierta.com/el-pulso-de-la-ciudad/movilidad/
confirmado-transporte-sera-mas-barato-barcelona_11008_102.html
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